Final answer:
If all firms in an industry join together, they form a cartel and can maximize their joint profits by acting like a monopoly. Cartels can control the market supply to influence prices and earn positive economic profits. However, cartel formation is illegal in many regions and is subject to government regulation and anti-trust laws.
Step-by-step explanation:
If all firms in an industry joined together and behaved as a single seller, they could maximize their joint profits. We refer to such a group as a cartel. This is because a cartel acts like a monopoly by choosing the quantity of output where marginal revenue (MR) equals marginal cost (MC), which enables them to set the price higher than in competitive markets. Firms in a cartel can earn positive economic profits since they can control the market supply and therefore influence price. However, it is important to note that forming cartels is illegal in many parts of the world due to the detrimental effects on consumers and the market as a whole. Anti-competitive practices like these are often regulated and monitored by government agencies to prevent monopolistic behaviors and ensure fair competition.
What stops oligopolists from acting together as a monopolist and earning the highest possible level of profits? The answer lies in anti-trust laws and regulations that prohibit such collaborative efforts. Moreover, the inherent instability of cartels due to the incentive for individual firms to cheat on the agreement for more market share can also lead to the breakdown of such collusion. This results in what's known as 'cutthroat competition,' returning the industry back to a state where firms earn zero economic profits in the long run.